PROBLEM 2 You have been engaged to prepare audited financial statement figures for Reggie, Inc. The records are in agreement with the following statement of financial position:

REGGIE, INC.

Statement of Financial Position December 31, 2022

Assets Liabilities and Equity Cash P10,000 Accounts Payable P10,000 Accounts receivable 12,000 Notes Payable 3,000 Notes receivable 13,000 Share capital 20,000 Inventory 25,000 Share premium 40,000 Equipment- net 40,000 Retained Earnings 27,000 P100,000 P100,000 A review of the records of the corporation indicates that the errors and omissions listed in the table below had not been corrected during the applicable years:

Inventory Inventory Depreciation Prepaid Unearned Accrued Dec 31 Overstated Understated Expense Expense Income Expense 2019 --- P6,000 P250 P900 --- P200 2020 P7,000 --- 500 700 P400 75 2021 8,000 --- 150 500 --- 100 2022 --- 9,000 350 600 300 50 The net income according to the records is: 2020, P7,500; 2021, P6,500; and 2022, P5,500. No dividends were declared during these years, and no adjustments were made to retained earnings. Ignoring income tax effects, answer the following questions: 39. Adjusted net income/(net loss) for 2020: A. P (6,475) B. P 225 C. P (6,225) D. P 775 40. Adjusted net income/(net loss) for 2021: A. P 6,025 B. P (1,475) C. P 5,525 D. P (8,475) 41. Adjusted net income/(net loss) for 2022: A. P 22,000 B. P 14,000 C. P 6,000 D. P 22,150 42. What is the effect of these errors on the net working capital at the end of 2022? A. P 8,000 understated B. P 8,900 understated C. P 16,850 understated D. P 9,250 understated 43. What is the adjusted balance of the stockholders equity at December 31, 2022? A. P 95,000 B. P 95,900 C. P 103,850 D. P 96,250